Real Estate Legal Aspects- Ch 15 - Licensing and regulations

The maximum liability of the Recovery Account in any one transaction

$50,000.00.

The essential elements of a business opportunity sale are:

1. A bill of sale, which is the written instrument that passes the title to the personal property 2. Specific financial statements:A balance sheet, which shows the financial status of the business as of a particular date, including assets (business-owned items of value), liabilities (unpaid debts and other business expenses), and net worth, which shows the owner's equity (the difference between the assets and the liabilities)The Profit and Loss Statement, or P & L, which shows the profit and loss of the business during a specific time period

A broker who has received a buyer's money deposit and related instructions must take one of the following actions:

1. Give the money to the principal to the transaction. 2. Put it into a neutral escrow depository. 3. Put it into the broker's trust fund account at a bank or other financial institution.

Syndication is accomplished through three phases:

1. Origination (planning and buying the property, following registration and disclosure mandates, etc.) 2. Operation (in which the sponsor generally manages both the syndicate and the actual property) 3. Completion or Liquidation (the property's resale)

Within what timeframe is a broker required to deposit a buyer's money deposit in the appropriate account or provide it to the principal?

3 business days following receipt of the funds by the broker or the broker's salesperson, unless the money is in the form of a check that is to be held uncashed until the offer has been accepted

Remember that this money must be deposited with the appropriate account or with the principal within

3 business days following receipt of the funds by the broker or the broker's salesperson. This is true unless the money is in the form of a check that is to be held uncashed until the offer has been accepted.

First License Renewals For their first license renewal, both salespersons and brokers must complete the following continuing education requirements:

3 hours of Agency 3 hours of Ethics and Professional Conduct 3 hours of Trust Fund Accounting and Handling 3 hours of Fair Housing 3 hours of Risk Management At least 18 hours of courses in consumer protection Remaining hours in either consumer service or consumer protection

How long must brokers keep all trust account records?

3 years

All trust fund records are subject to DRE inspection. Brokers must keep all records chronologically for

3 yrs from the date of the conclusion of a transaction or listing if the transaction does not close. Included in the record inspection and retention requirements are all monthly trust account reconciliations, including canceled checks and deposit receipt

What is the continuing education requirement for all real estate licensees in California?

45 hours every 4 yrs

What are the required qualifications to be appointed as Commissioner?

A Commissioner candidate must have served for a minimum of 5 years as a real estate broker actively engaged in the real estate business in California, OR must possess 5 years' related experience associated with real estate activity in California during the last 10 years.

Prepaid Rental Listing Service License (PRLS)

A Prepaid Rental Listing Service (PRLS) license is required for individuals or companies that supply prospective tenants with listings of residential real property for tenancy while collecting a fee at the same time or in advance of when the listings are supplied.

What are the essential elements of a business opportunity sale?

A bill of sale and specific financial statements, such as a balance sheet and a profit and loss statement.

List three situations where the Commissioner may temporarily suspend or permanently revoke a real estate licensee's license.

A licensee found guilty of any of the following while performing real estate duties: Making a substantial misrepresentation by knowingly or negligently making a false statement of fact or failing to disclose a material fact. Acting for more than one party in a transaction without the knowledge and written consent of all parties (undisclosed dual agent) Acting in any matter that constitutes fraudulent or dishonest dealing

Nonresident

A nonresident of California is eligible for a California real estate license if that person meets all the salesperson or broker qualifications set forth on the previous pages and if a California resident could obtain a license in the applicant's state. Nonresidents that hold a California license must agree that they can be sued in a California court.

In addition to the exemptions listed above, real estate activities that normally require a license do not require a license if they are performed by:

A person acting on his or her own behalf with respect to his or her own property A regular officer of a corporation or a general partner of a partnership with respect to real property owned or leased by the corporation or partnership, respectively, or in connection with the proposed purchase or leasing of real property by the corporation or partnership, respectively, if the acts are not performed by the officer or partner in expectation of special compensation A person holding a duly executed power of attorney from the owner of the real property being offered for sale An attorney at law in rendering legal services to a client. A receiver, trustee in bankruptcy or other person acting under order of a court of competent jurisdiction A trustee for the beneficiary of a deed of trust when selling under authority of that deed of trust

Non-Working Status

A salesperson may be issued and hold a license, but NOT perform acts requiring a license, without being in the employ of a broker. The license in such a case is given "non-working status" until the salesperson becomes employed by a broker and that broker notifies the DRE of such

A trust account must meet the following requirements:

A trust account must be designated as a trust account in the name of the broker as trustee. A trust account must be maintained with a bank or recognized depository located in California. A trust account must be a non-interest-bearing account. An out-of-state trust account is permitted only if the FDIC insures the account, and the account is used only to service specific first loans. A withdrawal may be made from a trust account only upon the signature of one of the following parties: The broker in whose name the account is maintainedA specifically designated broker-officer if the account is in the name of a corporate brokerA salesperson licensed to the broker, only with specific written authorization by the brokerAn unlicensed employee of the broker covered by a fidelity bond, if this is specifically authorized in writing by the broker who is a signatory of the trust account

Mortgage Loan Broker

According to the Business and Professions Code 10131(d), any individual who solicits borrowers or lenders for loans, negotiates loans, or services loans must be licensed as a real estate broker. As such, the licensee is subject to the regulations and disciplinary actions of the Real Estate Commissioner.

Grounds for Disciplinary Action

After an investigation such as we have already discussed, the Commissioner may temporarily suspend or permanently revoke a real estate license at any time where the licensee has been guilty of any of the following actions while performing real estate tasks: Making a substantial misrepresentation by knowingly or negligently making a false statement of fact or failing to disclose a material fact. Making any false promise designed to persuade, induce, or influence someone to do or not do something Engaging in a continued and flagrant course of misrepresentation or false promises Acting for more than one party in a transaction without the knowledge and written consent of all parties (undisclosed dual agent) Commingling personal money and/or property with the money or property being held on behalf of the client Failing to specify a definite termination date on an exclusive listing or any other agreement which requires such a date Accepting a secret profit or undisclosed compensation on a real estate transaction Combining a listing with an option to purchase without disclosing the licensee's potential profits and obtaining the owner's written consent for the amount of profit Acting in any matter that constitutes fraudulent or dishonest dealing Obtaining the signature of a prospective purchaser of a business opportunity without first obtaining the written authorization of the owner Failing to disburse funds in accordance with a commitment to make a mortgage loan that is accepted by the applicant when the real estate broker represents to the applicant that the broker is either the lender or authorized by the lender to issue the commitment Intentionally delaying the closing of a mortgage loan for the sole purpose of increasing interest, costs, fees, or charges payable by the borrower

Subsequent License Renewals

After the first renewal, both salespersons and brokers must complete the following continuing education requirements: 15 hours of continuing education in Ethics, Agency, Fair Housing, Trust Fund Handling, and Risk Management OR one 8-hour survey course that covers all of those topics At least 18 hours of courses in consumer protection Remaining hours in either consumer service or consumer protection

There are two types of REITs:

An Equity Trust : A company that invests in real estate itself or in several real estate projects; or A Mortgage Trust : A company that invests in mortgages and other types of real estate loans/obligations

Describe the two types of Real Estate Investment Trusts (REITs).

An Equity Trust: A company that invests in real estate itself or in several real estate projects. A Mortgage Trust: A company that invests in mortgages and other types of real estate loans/obligations.

The applicant for an original real estate broker license must:

Be at least 18 years old. Be honest and truthful. (Note: Conviction of a felony or a crime of moral turpitude could result in a license denial.) Provide proof of legal presence in the United States. Be fingerprinted. Have been actively engaged as a real estate salesperson for at least two years during the five years immediately preceding the application OR have a valid 4-year college degree with a major or minor in real estate. Pass the qualifying examination. Pay the applicable license fee. Have successfully completed eight courses.

A candidate for an original real estate salesperson license must:

Be at least 18 years or older. Be honest and truthful. (Note: Conviction of a felony or a crime of moral turpitude could result in a license denial.) Submit his or her social security number to DRE. Provide proof of legal presence in the United States. Be fingerprinted. Qualify for and pass a written examination with a score of 70% or greater. Submit a license application to the DRE within one year of having passed the salesperson's exam. Pay the applicable license fee. Have an employing broker at the time the license is issued.

If a broker authorizes an unlicensed person to act in the capacity of a licensed salesperson, including providing compensation for real estate services, who will be disciplined under the law?

Both the broker and the licensee

Explain how the California Department of Real Estate (DRE) protects the public.

DRE protects the public from incompetent or downright dishonest real estate licensees through the enactment and enforcement of laws relating to real estate and by establishing requirements for the real estate salespersons' and brokers' licenses.

California Department of Real Estate

Each state has its own real estate licensing laws and regulatory body. In California, this regulatory agency is the California Department of Real Estate, also known as the DRE. The MAIN purpose of the DRE is to protect the public. The DRE achieves this purpose through the enactment and enforcement of laws relating to real estate and by establishing requirements for the real estate salespersons' and brokers' licenses.

Trust Account Records

Every broker must keep a record of all trust funds received, including uncashed checks held by the instruction of his or her principal. This record, including records maintained under an automated data processing system, must be in columnar form and include the following information: Date trust funds were received From whom the trust funds were received Amount of funds received With respect to funds deposited in an account, date of the deposit With respect to trust funds previously deposited to an account, the check number and date of the related disbursement With respect to trust funds not deposited in an account, the identity of the other depository and the date the funds were forwarded The daily balance of the account

Fictitious Name

Every license applicant who wants to have the license issued under a fictitious business name must file with his or her application a certified copy of his or her fictitious business name statement filed with the county clerk's office in the country where the business is located. A salesperson using a fictitious business name can use that name only as permitted by his or her responsible broker.

Other important things to remember include:

Every license applicant who wants to have the license issued under a fictitious business name must file with his or her application a certified copy of his or her fictitious business name statement filed with the county clerk's office in the country where the business is located. A salesperson using a fictitious business name can use that name only as permitted by his or her responsible broker.

Late Renewal

If a license holder fails to renew prior to its expiration, the person may legally renew the license within two years from such expiration by submitting a proper application, evidence of completion of the current continuing education requirements, and the appropriate late renewal fee. Remember that someone with an expired license may NOT work as a real estate agent OR collect a commission. Two years after a license expires, all license rights lapse. The individual will be required to re-qualify through the examination process before being licensed in real estate.

Acting Without a License

If a person in California acts in the capacity of a real estate salesperson without being licensed under the California licensing laws, that individual cannot receive any compensation for such acts. Section 10132 of the Code defines a real estate salesperson and the acts requiring licensure and employment by a real estate broker. If an unlicensed person does act as a real estate salesperson or broker, he or she will be penalized under the law. In addition to the unlicensed person being held accountable, if a broker has allowed this person to operate under him and compensated this person for performing real estate activities that by law require the person to possess a license, then that broker will also be disciplined under the law. The Commissioner may impose a fine against any real estate broker who is found in a disciplinary hearing to have compensated an unlicensed person for performing such activities without a license. In addition, if said broker has compensated the non-licensed for the activities for which he or she is not licensed, that broker is guilty of a misdemeanor and may also be fined by the courts, under Sections 10138, 10139, 10139.5 of the Code. The penalties for engaging in unlicensed real estate activity are a fine of up to $20,000 and/or six months imprisonment for an individual, and a fine up to $60,000 for a corporation

Corporation

In some cases, brokers will elect to do business as a corporation. A corporation may be licensed as a real estate broker, provided at least one officer of the corporation is a duly qualified real estate broker willing to act as the corporation's responsible designated broker-officer. Along with the appropriate Corporation License Application and fee, the corporation must submit a Certificate of Status issued by the Secretary of State within the 30 days prior to the date the application is filed and a statement of officers as filed with the Secretary of State.

If the charges are not sustained at the hearing, they are dismissed. On the other hand, if the testimony substantiates the charges and they appear to be sufficiently serious, the decision against the licensee could include:

License suspension for a specified period, such as 30 days, 60 days, or one year A fine in place of suspension License suspension and a fine License revocation and issuance of a restricted license for the remaining term of the original license License revocation

Define commingling.

Mixing broker / salesperson money with the client- Illegal

Mineral, Oil, and Gas (MOG) Properties

New MOG licenses have not been issued since 1993. However, persons holding such a license can renew the license every four years for life. When brokering property having mineral, oil, or gas rights, a licensed real estate broker may do the following without any additional licensing: Sell or offer for sale Purchase or offer for purchase Solicit prospective sellers or purchasers Solicit or obtain listings Lease or offer to lease Collect rents or royalties from such property or its improvements Exchange Assist or offer to assist in filing an application for the purchase or lease of such property owned by the state or Federal Government

8uikkWhat is California's policy regarding compensation for an unlicensed person acting in the capacity of a real estate salesperson?

No unlicensed person can recieve compensation

Any complaint must be filed within three years of the alleged violation. Investigative procedures followed by the Commissioner's staff include

Obtaining a statement from the accused licensee regarding the alleged violation Examining all records and documents pertinent to the transaction Interviewing all parties to the transaction about which the complaint was made

How does DRE generate revenue for operating costs?

Operating revenue is derived from fees charged for real estate licenses, subdivision public reports, and various other permits issued by the Department.

List three of the California Real Estate Commissioner's specific duties.

Qualification of applicants and issuance of real estate licenses Investigation of complaints and, where appropriate, pursuit of formal action against licensees Regulation of the sale or lease of subdivision interests

Define business opportunity.

Real Estate Law defines a business opportunity as the sale or lease of the business and goodwill of an existing business enterprise or opportunity. This also includes the business's stock, trade fixtures, and trade name, as well as a non-competition agreement and lease assignment.

In addition to the above, a salesperson candidate must have completed three college-level courses including:

Real Estate Principles (45 hours) Real Estate Practice (45 hours) One 45-hour course from the current list of approved courses

What is real estate syndication?

Real estate syndication combines the money of individual investors, along with the management of a sponsor, to invest in real estate and achieve a good rate of return on that investment.

Real Estate Syndication

Real estate syndication gives a person the chance to channel his or her private savings into real estate investments for which other financing cannot be obtained or is not available because of the large amount of money involved. syndication allows for professional management, which is considered essential to a successfulsyndication.

Qualification as a Trust

Regarding taxation, there are many legal mandates that must be fulfilled to meet the qualification for a "trust" and thereby qualify for the tax benefits of other regulated investments, such as mutual funds, as mentioned previously. One of these requirements is that the company must distribute at least 90% or more of its income to its shareholders. (If this requirement is met, then that company does not pay federal taxes on that distribution, but only on the retained earnings, which are taxed at corporate rates.) Additional regulations are as follows: The REIT must be beneficially owned by at least 100 investors. No five, or fewer, persons may hold more than 50 percent of the beneficial interests. Transferable shares or certificates of interest must prove the beneficial interest. In California, each share or certificate of interest must carry with it an equivalent vote.

Trust Fund Regulations

Remember that while checks are universally accepted as equivalent to cash in California business transactions, promissory notes are not. Therefore, a broker must be careful not to misrepresent this fact in such a situation, because he or she will be violating the Real Estate Law if he or she, directly or through implication, misrepresents to the broker's principal/seller that a purchaser has given cash or a check as an earnest money deposit, when in fact the broker has accepted a non-negotiable promissory note. California law has held that a post-dated check may be considered the equivalent of a promissory note. Therefore, a broker should not accept a post-dated check from a buyer, since this may result in mischaracterization of the form of earnest money deposit without adequate disclosure to the seller.

When a License is Required

Sells or offers to sell, buys or offers to buy, and solicits prospective sellers or purchasers of real estate. Solicits or obtains listings of real estate. Negotiates the purchase, sale, or exchange of real property or a business opportunity. Assists or offers to assist in filing an application for the purchase or lease of property owned by the state or federal government. Negotiates loans, collects payments, or performs services for borrowers or lenders or note owners. Sells or offers to sell, buys or offers to buy, or exchanges or offers to exchange a real property sales contract, or a promissory note secured directly or collaterally by a lien on real property or on a business opportunity, and performs services for the holders thereof. Leases or rents; offers to lease or rent; places for rent; solicits listings of places for rent; solicits for prospective tenants; negotiates the sale, purchase or exchanges of leases on real property; or collects rents from real property.*

After the investigation is complete, the Commissioner may:

Take no action. This is often the case, as many complaints results from poor maintenance of records and documents rather than actual law violations. Issue a citation or warning letter. The Commissioner may take this action for minor violations or unintended errors, prompting brokers to look carefully at their processes to be sure small errors don't turn into more serious errors. Informal conference. This involves the broker sitting down with the DRE auditor to review corrections the broker should make to avoid minor errors in record keeping and procedures.

If a broker accepts a check (or promissory note) as an earnest money deposit, the following regulations apply:

That broker must make full disclosure to the seller. If a buyer has given a check to the broker as an earnest money deposit with written instructions to hold the check until acceptance of the offer, the buyer's instructions should be followed. But the seller must be informed in writing that the buyer's check is being held and not negotiated, and the seller must receive this disclosure at the exact time the actual offer is presented to him or her. During the time between the receipt of the check by the broker and the acceptance of the purchase offer by the seller, the broker must record a receipt of the check in the broker's trust fund records and hold the check in a safe place.

Who enforces the collection of sales and use taxes in California?

The California State Board of Equalization

The Commissioner's Authority

The Commissioner has the authority to investigate the actions of any person engaged in the business or acting in the capacity of a licensee in California and has the power to suspend or revoke the real estate license. Upon a verified written complaint, the Commissioner must investigate such a matter. However, it is at his or her discretion to decide whether or not to investigate such a matter on his or her own.

Describe when a licensee may be issued a restricted license.

The Commissioner may issue certain types of restricted licenses when a license has been suspended, revoked, or denied after a hearing.

Restricted License

The Commissioner may issue certain types of restricted licenses when a license has been suspended, revoked, or denied after a hearing. These are considered probationary licenses and contain specific restrictions. The Commissioner has the authority to restrict licenses by any of the following factors: Term (one month, three months, etc.) Employment by a particular broker (for a salesperson) Limitation to a certain area or type of activity Requiring detailed reports of each transaction Requiring the filing of a surety bond Other conditions or combinations of conditions

What are the Commissioner's Regulations?

The Commissioner's Regulations are rules that are part of the California Administrative Code. These regulations have been established and are enforced by the Commissioner.

Partnership

The DRE does not issue partnership licenses. A partnership may legally perform licensed acts, as long as every partner through whom the partnership so acts is a licensed real estate broker.

Once the plaintiff files the payment application, the following regulations apply:

The DRE has 15 days to notify the applicant of any deficiencies in the application. After the application is substantially complete, the DRE has 90 days within which to pay, compromise, or deny the claim. If an application is denied, the applicant has 6 months within which to refile with the court that rendered the judgment. If payment is made, the license of the judgment debtor is automatically suspended until he or she has repaid the amount, plus interest. Note: Bankruptcy will not release the licensee from this requirement.

Real Estate Fund

The Real Estate General Fund is an account that holds all the money collected from license and exam fees and is used for the operating expenses of the DRE. However, 20% of the General Fund is specifically set aside to be divided as follows: 8% for the Real Estate Education and Research Fund 12% for the Recovery Fund

The Real Estate Syndicate Act

The Real Estate Syndicate Act, under the California Business and Professions Code, went into effect in 1970. This law moved the jurisdiction of some non-corporate syndicates from the Department of Corporations to the Department of Real Estate. Other syndicate offerings remained with the Department of Corporations. However, the Real Estate Syndicate Act was repealed eight years later, thus returning the regulation of all REITS to the Department of Corporations, where it remains.

What is the Recovery Fund?

The Recovery Fund is an account established as a last resort for a consumer who has obtained a final civil judgment or criminal restitution order against a real estate licensee based on fraud or certain other grounds.The consumer can receive payment of damages and arbitration from this fund if the judgment hasn't been satisfied through the normal post-judgment proceedings

List three parties who are exempt from real estate licensing requirements in California.

The employees of banks or other lending institutions Cemetery authorities Short-term (vacation) rental agents

The following parties are exempt from the licensing requirements in California. These parties DO NOT need to be licensed as real estate salespersons or brokers because of the nature of their work (in order to carry out their jobs as such):

The employees of banks or other lending institutions The lenders who make federally-insured or federally-guaranteed loans Licensed personal property brokers Cemetery authorities Certain agricultural associations Certain collectors of payments for lenders or on notes for owners in connection with loans secured directly or collaterally by liens on real property Some clerical help (depending on the extent of the duties handled by the clerical personnel) Resident managers of apartment buildings and complexes or their employees Short-term (vacation) rental agents Employees of certain lending institutions Employees of real estate brokers for specific, limited functions

Formal Hearing

The formal hearing is conducted in accordance with procedures set forth in the Administrative Procedure Act. The accusation or statement of issues is served upon the licensee, who is informed of the rights of an accused. In the hearing, the Commissioner becomes the complainant and brings the charges against the licensee. The original complainant usually becomes a witness. The licensee, known as the respondent in the hearing procedure, may appear with or without counsel.

For payment to be made, the following regulations apply:

The judgment must be based upon intentional fraud or conversion of trust funds. The licensee must have been properly licensed at the time the cause of action arose and must have been performing acts requiring a real estate license. The applicant must file the application within one year of the final judgment or criminal restitution order. The applicant must show that he or she has made all reasonable efforts to satisfy the judgment from the assets of not only the judgment debtor but also all other persons who may have been liable in the transaction, such as the employing broker or the real estate company itself.

How would a broker's license expiring affect the broker's affiliated licensees?

The licenses of the affiliated licensees are automatically placed on non-working status until the broker renews his or her license.

What are the penalties for engaging in unlicensed real estate activity?

The penalties for engaging in unlicensed real estate activity are a fine of up to $20,000 and/or six months imprisonment for an individual, and a fine up to $60,000 for a corporation.

What happens if a licensee fails to renew his or her license prior to its expiration?

The person may legally renew the license within two years from the expiration by submitting a proper application, evidence of completion of the current continuing education requirements, and the appropriate late renewal fee. If the person waits longer than two years, he or she must re-qualify through the examination process.

The Commissioner's specific duties include but are not limited to the following

The qualification of applicants and issuance of real estate licenses The investigation of complaints and, where appropriate, pursuit of formal action against licensees The investigation of non-licensees alleged to be performing acts for which a license is required The regulation of the sale or lease of subdivision interests Through real estate broker and other license requirements, the regulation of dealings in mineral, oil and gas property and Prepaid Rental Listing Services

Bulk Sales Rules

The rules of the Bulk Sales Act apply when a business is sold that involves inventory. Keep in mind that a bulk transfer is the transfer of a major portion of a business's inventory that is not sold to customers. In such a transfer, the buyer must give public notice 12 business days before the transfer occurs. The buyer must record this Notice of Intention to Sell in the county recorder's office where the property is located and must also publish the notice in a general circulation newspaper. It must also be sent to the county tax collector by certified or registered mail. The notice is intended to let the seller's creditors know about the upcoming sale so they can file a claim if trade credit is still owed on the inventory.

California Trust Funds and the Real Estate Salesperson

There are occasions when a real estate salesperson, rather than the broker, might accept the trust funds on the broker's behalf. Such a situation is outlined under the California Business and Professions Code Section 10145. The real estate salesperson that accepts trust funds on behalf of his or her broker must immediately deliver the funds to the broker. At that point, the broker might direct the salesperson to put the funds into the hands of the broker's principal; place the funds into a neutral escrow depository; or deposit the funds into the broker's trust fund bank account. A salesperson is authorized to take such actions on the behalf of and at the direction of the broker under whom he or she is licensed.

These regulations apply to those licensees operating under the prepaid rental listing service license:

There is no examination requirement for this 2-year license. An additional location license is required for each location (other than the main office) from which PRLS activities will be conducted. PRLS activities at each location must be under the direct supervision of either a PRLS licensee or designated agent; however, a licensed individual, licensed officer or designated agent may not simultaneously supervise more than one location at a time. PRLS activities do not include negotiation of lease or rental contracts. Real estate brokers do not need an additional license or permit to operate a prepaid rental listing service if their PRLS activities are conducted at their regular place of business. However, such a broker is required to use a contract approved in advance by DRE.

Non-trust funds

These non-trust funds, provided that they are not commingled with trust funds, are not subject to the California Real Estate Law or the DRE Commissioner's Regulations. Non-trust funds include real estate commissions, general operating funds, and rents and deposits from broker-owned real estate. One of a broker's most important responsibilities is handling the money of other people. A broker is given the authority to receive earnest money deposits on behalf of the seller, and it's up to him or her to ensure the secure handling of these funds.

Remember that all licensing courses must be:

Three semester-unit (or four quarter-unit) courses in length College-level courses Offered by an institution of higher learning accredited by the Western Association of Schools and Colleges or similar regional accrediting agency recognized by the United States Department of Education, OR by an equivalent course of study offered by a private vocational school approved by DRE.

What are trust funds?

Trust funds are money or other things of value that are received by the broker on the part of another person.

Child Support Regulations

Under Section 11350.6 of the Welfare and Institutions Code, the DRE may NOT issue or renew a full-term license if the applicant is on a list of persons (obligors) who have not complied with a court order to provide child support payments. Additionally, a license may be suspended if a licensee's name remains on the list 150 days after notice. Information concerning such individuals is provided to the DRE by the Department of Social Services, which obtains the information from the district attorney of each county in California. A 150-day temporary license may be issued to an otherwise qualified applicant who is on the list of child support obligors. The applicant must be advised that the license applied for cannot be issued unless a release is obtained from the district attorney's office during the 150-day temporary license period. If the applicant fails to submit an appropriate release to the DRE from the district attorney's office within the 150-day period, all license rights cease. Only one 150-day temporary license may be issued. License fees submitted are not refundable. In order to be issued another license, all applicable statutory provisions must be met and another licensing fee must be submitted. Renewal applicants may have to submit a late renewal fee. The DRE is regularly provided with a supplemental list of obligors, which identifies individuals who are more than four months delinquent in child support payments and then is matched against the DRE's total license population. If there is a match of an existing licensee and the license is not due for renewal for at least six months, the licensee will be advised that the license will be suspended if the delinquency is not cleared within 150 days. The suspension will remain in effect until the delinquency is cleared.

In order for the Commissioner to investigate a complaint, what timeframe must the complaint be filed?

Within three years of the alleged violation

Limited Liability Company,

added in 1994, includes a liability limitation not unlike that offered to corporation shareholders.

Syndication Corporation

allows for both centralized management and limited liability for the investors, but, on the downside, has negative tax features that make it unappealing for modern syndicates.

Real Estate Investment Trusts

also known as a REIT, is a type of company that sells securities specializing in real estate ventures, and requires a minimum of 100 investors. REITS, sometimes referred to as the "mutual funds" of the real estate business, were created in 1960 as an aspect of the federal tax law to encourage small investors to combine their resources with the resources of others so the companies could, together, raise venture capital for real estate transactions. REITs invest in an assorted portfolio of real estate and mortgage investments.

Conversion,

another illegal accounting practice, is the unlawful misappropriation and use of a client's funds by a licensee. For example, if a broker spends the principal's deposit without the principal's authorization, he or she has not, technically, commingled the funds, but instead has converted those funds into his or her own. While both commingling and conversion are illegal, conversion is a much more serious violation than commingling and has heavy criminal penalties.

Section 10177 of the Business and Professions Code

applies to situations in which the licensee involved was not necessarily acting in the capacity of an agent.

Trust funds

are money or other things of value that are received by the broker on the part of another person. Cash and non-cash items include the following: Cash A check used as a purchase deposit, made payable to the broker or to an escrow or title company A personal note made payable to the seller The pink slip on an automobile, given as a deposit

The Commissioner's Regulations

are rules that are part of the California Administrative Code. These regulations have been established and are enforced by the Commissioner

General Partnership or Joint Venture

avoids the double taxation (which a "regular" corporation would incur), but, on the negative side, there is an unlimited liability provision, as well as a lack of centralized management.

If the buyer does not abide by the provisions of the bulk transfer law,

he or she will have primary responsibility for the debts of the business. If the business was sold at an auction, the law requires the auctioneer to be personally responsible for the recording and publication of the Notice of Intention to Sell.

The Recovery Fund

is an account established as a last resort for a consumer who has obtained a final civil judgment or criminal restitution order against a real estate licensee based on fraud or certain other grounds. The consumer, who has suffered financial loss due to the wrongful act of a licensee in a real estate transaction, can receive payment of damages and arbitration from this fund, if the judgment hasn't been satisfied through the normal post-judgment proceedings.

Business Opportunity Sales

is defined as the sale or lease of the business and goodwill of an existing business enterprise or opportunity. This also includes the business's stock, trade fixtures, and trade name, as well as a non-competition agreement and lease assignment. he sale of a business opportunity may involve the sale of only personal property. Typical transactions involve retail stores, automotive service businesses, restaurants, cocktail lounges, bakeries, manufacturing facilities, distribution and services businesses, etc. If real property is involved in the sale, the agent usually treats the sale of the business and sale of the land/building as two separate and concurrent transactions with two concurrent and contingent escrows.

Section 10176 of the Business and Professions Code

is the legal guideline for the actions of a real estate licensee performing or attempting to perform any of the licensed acts within the scope of the Real Estate Law. As a general rule, the licensee must have been acting as an agent in a real estate transaction before the section will apply.

Commingling i

is the practice of mixing a client's money with the agent's personal funds and it is illegal. A broker may keep up to $200 of personal funds in a trust account to service the account fees. However, it would be a better practice to ask the bank to deduct trust account service fees from the brokerage's general account. Also, when a transaction closes or some other event for which advance fees have been held completes, any commission monies or fees held in the trust account must be transferred into the brokerage's general account for disbursement as soon as practicable but no later than 25 days from the date the commission or advance fee is earned. At no time may any business or personal expenses be paid from the trust account nor may trust money be transferred to the general account for disbursement prior to the time they have been earned.

police power

is the right of the state to enact and enforce laws for the order, safety, health, morals, and general welfare of the public.

The Commissioner has been given both the power and the means to

issue regulations. The regulations serve as a means by which the Commissioner can more easily administer and enforce the Real Estate Law and the Subdivided Lands Law. The Regulations of the Real Estate Commissioner have the force and effect of law and, once issued, become a part of the California Administrative Code.

The total amount of judgments against any individual licensee is

limited to $250,000.00.

In order to be appointed as Commissioner, the Commissioner candidate

must have served for a minimum of 5 years as a real estate broker actively engaged in the real estate business in California, OR must possess 5 years' related experience associated with real estate activity in California during the last 10 years.

The Limited Partnership

offers many of the advantages found in both of the above syndication forms: the corporate advantages of limited liability and centralized management and the tax advantages of a partnership. Because of this, the limited partnership form is one of the most frequently used organizational forms for real estate syndicates. *

The California Real Estate Law, which regulates licensing and subdivisions in California, can be found in

the "Business and Professions Code."

Alcoholic Beverage Control Act

the Department of Alcoholic Beverage Control states the rules for how liquor is sold and distributed. Liquor licenses may be issued to qualified adults, partnerships, fiduciaries, and corporations.

The California Real Estate Commissioner is appointed by

the Governor and serves as the chief executive of the Department of Real Estate.

Should the buyer and seller not follow the regulations set forth by bulk sale law,

the sale is considered valid between the two parties, but it is void against the creditors. In this situation, the creditors are legally permitted to attach the inventory for the debt and sue within a year.

The Subdivided Lands Act

which is administered by the Commission.